Copper Prices rebound on LME

Copper Prices rebound on LME

Copper prices on the international metal market have continued to rise, allaying fears from Zambian mining players that the downward trend was a cost on their prospects to make real returns on their investment.

The three-month copper price on the London Metal Exchange (LME) went up by 0.16 per cent at $7,144 a ton, recording a significant growth from that recorded mid last year of an average US$6,800 a tone.

The downturn in the price of the red metal had mid last year dropped between 10,000 a ton to US$8,100 a tone recorded earlier. It later slumped below US$7,000 a tone, fueling fears among multinational companies in Zambia about their competitiveness.

The mining companies had contended that the downturn in the price may force them to review their operations in Africa’s largest copper producer, they said through the Chamber of Mines in Zambia, a consortium of foreign mining companies operating in Zambia’s copper industry.

Head of the chamber of mines in Zambia Emmanuel Mutati said if current copper prices persist, mining companies may be forced to address their operations through cutting down expenses which include labor costs.

He told reporters at a media breakfast meeting in Lusaka that the global economic downturn had affected copper prices in the past few months, which was having a negative effect on operations.

Earlier, London-listed Vedanta Resources Plc-owned Konkola Copper Mines (KCM), one of the country’s mining companies, had warned of its intentions to lay off about 2,000 of its workforce due to increased production costs, but the move was thwarted when government intervened.

Mutati reviewed that capital investments in mining operations since the privatization of the mines in the year 2000 and estimated at US$8 billion, have led to an increase in copper production from 260,000 tons to about 700,000 tons while production was likely to increase due to ongoing expansion projects.

However, other players argue that the fall in the price of copper should not discourage mining companies from initiating progressive methods of mining to realize real returns from their investments.

The stakeholders had projected the price of the red metal to rebound as demand from major markets including China was likely to increase in the subsequent months.

Standard Chartered Bank had argued then that the price of copper price on the London Metal Exchange (LME) would rebound in the fourth quarter of 2013 due to China’s demand for the commodity.

China’s copper consumption is expected to grow by five percent this year, resulting in the price to rebound in the fourth quarter to trade at US$7,350 per ton from US$7,250 per ton in the third quarter, the Bank’s global research said.

Bank head of commodities research Han Pin Hsi projected that between August and September last year was a weak seasonal demand in China and continued increase in mine supply is likely to put downward pressure on the price.

“We maintain our forecast of five percent growth in China’s copper consumption in 2013. Our price forecasts for three months on LME copper are US$7,250 per ton in the third quarter and US$7,350 per ton in the fourth quarter. We recommend that the consumers buy copper at US$6,600 to US$6,800 per ton in August,” he said.

Han said the buying by real consumers will provide support, although any such buying is likely to be in small volumes. He said prices are anticipated to rebound from around early October last year, based on the understanding of the seasonality of China’s copper consumption.

Zambia Consolidated Copper Mines Investment Holdings (ZCCM IH) said the Southern African nation needs to accept the reality that mining alone will not provide everything the country needs to prosper, according to its board chairman Willa Mung’omba.

As a nation, he added, people need to begin to see the logical linkages among mining, manufacturing, agriculture and tourism sectors to adapt better to the changing business environment.

“ZCCM-IH recognises that mining should not be the mainstay of the Zambian economy. We do not believe mining will transform the Zambian economy and fight poverty on its own,” Mung’omba said during a luncheon ZCCM-IH hosted for Vice-President Guy Scott and other senior government officials at the sidelines of the 87th edition of the Agriculture and Commercial Show in Lusaka.

Mung’omba said it has been acknowledged that successful agriculture in a country has the ability to transform industries and societies and that in order for the country to grow with the changing environment, greater emphasis needs to be placed on increasing the effectiveness and efficiency of the agriculture sector.

“Zambia will industrialise only when she has harnessed this sector effectively. As ZCCM-IH, we have come to understand this reality and therefore believe that the Zambian economy and businesses are better placed to adapt to change because of our country’s rich natural resources endowment,” he added.

In line with desire to embrace change, ZCCM-IH has recently launched an exploration company called MAWE. The company, apart from doing general exploration, it has been mandated to exploit the significant opportunities that exist for the establishment of local industries to produce some of the inputs into the mining industry.

Mung’omba said the effort needed to adapt to an evolving and dynamic business environment of the country is challenging, yet necessary, which ZCCM-IH will consciously strive to overcome in an effort to set the pace for flourishing Zambian business and industry leaders.

Copper is Zambia’s main export earner, providing 80 percent of the foreign exchange to the country. Mining analysts have projected that production of copper was likely to hit a high of 1.5 million tons per year by 2016, which will make it become the fourth largest world producer from the current seventh.

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